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June 1, 2026 — 5:00am
Queenslanders can be proud of their LNG sector. The first tanker left Gladstone for Asia in January 2015, and within six years, Australia had catapulted into top spot as the world’s largest exporter of LNG.
To execute such complex engineering so successfully and so quickly is an underappreciated miracle of Australian industry.
And right now, things are looking pretty rosy for Australian gas. Global prices are high, demand is up, and buyers are looking for reliable sellers (like us).
But beyond the current glow, things look much grimmer for Queensland LNG long-term.
Even with the temporary loss of Qatari supply (because of the Iran war), the world is entering a gas glut. We’re about to be flooded with cheap gas coming out of the US that will depress prices again, probably for a decade.
In a buyer’s market, the most expensive player will lose. Sadly, that’s us. Australia’s cost of production is about a third higher than that of the US, and nearly triple Qatar’s – our two biggest competitors.
And over the long term, our big customers are just going to buy less gas.
About 80 per cent of Australia’s LNG exports go to Japan, China, and South Korea, and all three countries are looking to reduce their reliance on imported gas as they chase things that gas can’t deliver them – cheaper power, energy sovereignty, and decarbonisation.
Yes, we might find new customers. But every country has just lived through the same energy shock that we have, and all are re-evaluating whether relying on expensive, imported fuels really is the path to prosperity.
The brutal truth is that Australian LNG exports peaked in 2022 and have declined ever since, and that decline is not likely to turn around.
This is a problem because Australia gets rich off LNG. Last year, LNG exports were worth $60 billion, second only to iron ore. That’s not easy money to part with.
But we need to be real. Australia will eventually have to get out of LNG because selling so much of the stuff costs us all by driving the changes to our climate that make our farming harder, our floods and droughts worse, and drag on the economy.
Anyone who sells you only one side of the story – that LNG is all good or all bad – is selling you a fantasy. Australia’s reliance on LNG exports is actually a deal with the devil – get rich quick but stay poorer longer.
This is the complex reality of LNG – it’s in Australia’s interests to sell it in the short term and quit it in the long term.
The question for Queensland is not whether LNG is good or bad, but how do we harness it to maximise its benefit to Australia while it’s here? And, given that we can’t keep exporting it forever, what will we do once it’s gone?
The first thing is to tax it properly. Given exports are now probably in terminal decline, every day we fail to tax gas properly is a day and a dollar we’ll never get back.
The current federal gas tax is woeful. No LNG project paid any federal gas tax before 2023, despite earning $74 billion in revenue that year. One project in the Northern Territory has been exporting for nearly a decade and hasn’t paid a cent.
Reforming the federal gas tax should be a no-brainer for Queenslanders because it only applies to offshore gas. All Queensland gas is onshore, so it’s already subject to state royalties and is exempt from the federal tax.
A weak gas tax just means money is flowing to exporters based in the NT and Western Australia. Instead, it could be flowing to the Commonwealth, then back into better services for Queenslanders.
Part of that money should be invested into the industries of tomorrow. Queensland has huge natural advantages in minerals processing, renewables, aluminium, and copper. The opportunity is there for whichever place is smart enough to grab it.
LNG fuelled the last export boom, but it won’t fuel the next one. Thinking that it will is just hitching Queensland’s wagon to yesterday’s horse – and we’ll all be poorer if we make that mistake.
While the LNG sector is making bank, we should hit them up to drive bigger emissions cuts. Last year, the sector recorded 36 million tonnes of emissions – more than all Queensland farmers and industry combined.
These LNG emissions could easily be reduced, and with record gas prices, the companies can afford it. Unfortunately, federal emissions policy on LNG is pretty weak. So the LNG players have all the options, all the money, and none of the responsibility. The government should make LNG do its fair share of emissions cutting.
It took a bit of smarts and a lot of co-ordination between government and industry to drive the Queensland LNG boom, and it’ll take more of both to drive the next boom in the next industry.
But the first step is demanding a bit of plain talking from our politicians. The idea that we can pin our prosperity to LNG for decades to come is a fairytale, not an economic strategy.
LNG won’t disappear tomorrow. But restructuring an economy takes decades. That’s why we need to crack on today to prepare for life after LNG. Queensland won’t be exporting LNG forever, but plan properly, and it might just stay an export powerhouse.
Hamish McKenzie is the deputy director of the energy and climate change program at the Grattan Institute and is a co-author of the new Grattan Institute report Out of Gas.
